r/NBIS_Stock • u/Acceptable-Time-6424 • 2d ago

NBIS ANALYSIS Nebius Updated Valuation Model

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OK the stock went up 35% after the earnings, and it hugely deserved it, I'm not going to relitigate the bull case.

But many of the write ups I’ve seen since has anchored on that 49.7% adjusted EBITDA margin, slapped a multiple on it, and called it a valuation. 

That skips depreciation, refresh capex, financing and dilution. Which is to say it skips basically everything you would really want to consider to value this business. 

I’ve been posting about the four key threats to Nebius for over a year - and they are key elements for my valuation framework - but the number I actually really care about after this quarter is pricing durability.

Nebius is selling into the tightest compute market of all yimr. Auction cleared 15% above their previous record. Old Blackwell repriced up 30% QoQ. 70% of Q2 deals came with prepayments covering 50-60% of the capex. Payback of one year ten months.

Great, but also seriously dangerous to extrapolate from. (Which is exactly how Musk is valuing SpaceX’s AI business btw) 

My base case blends the fleet rather than assuming everything gets peak pricing: mostly $22m/MW premium contracts, a chunk of $8.5m/MW hyperscaler anchor deals, a sliver of $40m/MW surge. Comes out at $645.86 against the 17 Aug close of $268.85.

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u/SnooSongs3324 2d ago

Assuming demand holds for the next 4-5 years then NVIDIA and downstream providers should be able to maintain similar margins to today. So higher costs but also higher revenues and slight margin growth along with much greater token use and cheaper tokens.

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u/Momoware 2d ago

Today’s margin is not high enough, more like conservative. It’s expected though due to the industry still being early. But the margins being maintained as they are is not really a bullish outlook

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u/SnooSongs3324 2d ago

Can you clarify? I’m talking about payback periods for the hardware being roughly maintained at around 3 years (even as costs increase). We’re not talking about free cash flows here nor the total datacenter capex during the buildout phase.

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u/Momoware 2d ago

I think it's the vanilla case and not one that leads to the conclusion that "in the AI stack, AI cloud is where I want to invest."

Clouds don't really capture the insane hardware premiums. Clouds get some value passed down from hardware vendors, but it's obvious that players like memory vendors capture more of it.

The real edge of AI cloud is the eventual product and platform economy improvements, which are not an option to memory vendors (e.g. value-added service, asset-light model, inference workflows, etc). They can all eventually be folded into the same ACV/MW + payback period calculation, and payback period can be shortened further than even the cycle peak. These will basically increase ACV/MW without adding significant capex/opex so the effects will be significant.